BLOOMBERG MARKETS: The 14 Most Exciting Frontier Markets In The World

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After tackling emerging markets, Bloomberg Markets Magazine has ranked its favourite frontier investment spots for 2012.

Like its EM list, BMM rates frontier markets based on International Monetary Fund four-year economic forecasts, World Bank demographic data and Bloomberg market figures, but also takes into account each nation’s reliance on energy imports and exports.

The Middle East and Eastern Europe dominate the list — but neither makes it to number one.

15. Ukraine

Total score: 45.9

Of the 15 frontier markets on the list, Ukraine suffers the highest level of currency volatility, the toughest business conditions, plus a big inflation rate and an expensive stock market (on a price-to-earnings basis).

However, the Eastern European nation has one of the best economic growth profiles of the countries included, which is what lands it on the list.

Source: Bloomberg Markets

14. Kenya

Total score: 49.7

Kenya makes up for its average growth and inflation rates and currency volatility with its cheap stocks. While it's significantly easier to business here compared to Ukraine, Kenya still gets slapped with the second-worst score.

Source: Bloomberg Markets

13. Croatia

Total score: 52.0

Croatia's stock market is cheap and inflation is low, but so is growth (relatively). The currency is also highly volatile and the government is saddled with a lot of debt -- more than any other nation on the list.

Source: Bloomberg Markets

12. Oman

Total score: 54.9

Oman's currency is one of the most sable on the list and government debt is minuscule -- it's also one of the easiest frontier markets to do business in. But growth is slow and stocks aren't cheap.

Source: Bloomberg Markets

11. Botswana

Total score: 55.0

Botswana is one of Africa's engines of growth, with enviable GDP projections, comparatively low government debt, and good business conditions. It stumbles on currency volatility and high inflation.

Source: Bloomberg Markets

10. Tunisia

Total score: 56.1

Despite kicking off the Arab Spring movement, Bloomberg Markets says Tunisia is a fairly easy place to do business (it has relations with the European Union, the Arab League and the African Union). GDP is also expected to grow strongly over the next four years.

However, stocks are expensive and the government has taken on plenty of debt.

Source: Bloomberg Markets

9. Bahrain

Total score: 56.2

Another revolutionary hotspot, Bahrain's inflation rate is low, its exchange rate barely moves, and it's an easy place to do business.

However, stocks are the most expensive you'll find among the frontier markets on the list, and government debt is up there too.

Source: Bloomberg Markets

8. Serbia

Total score: 58.2

Serbia is one of the fastest growing European frontier markets, with a moderately-priced stock market. It is weighed down by its elevated government debt levels and currency volatility. It's also difficult to business there.

Source: Bloomberg Markets

7. Qatar

Total score: 58.5

It's easy to business in Qatar and its currency is pegged to the U.S. dollar, so volatility isn't an issue. Unfortunately, GDP growth is subdued -- the lowest of any nation on the list -- and it has mid-range inflation, government debt and stock prices.

Source: Bloomberg Markets

6. Kazakhstan

Total score: 59.3

Kazakhstan boasts the very best GDP growth projections of Bloomberg Markets' top 15 frontier markets, but that comes with a huge inflation rate, a pricey stock market, and a currency that is prone to big swings. It's fairy easy to business there, though.

Source: Bloomberg Markets

5. Kuwait

Total score: 60.2

A stable currency, low government debt and moderate inflation land Kuwait in the top 5, but it doesn't have much to boast about when it comes to growth projections or stock price-to-earnings figures. It also fares averagely on the ease of doing business measure.

Source: Bloomberg Markets

3. Romania

Total score: 61.4 (equal 3rd)

Romania's economy is exposed to grow almost twice as fast as Kuwait's, and the central European nation's stock market is about half the price. However, it has one of the most volatile currencies on the list and government's debt is a little higher than the frontier average.

Source: Bloomberg Markets

3. Bulgaria

Total score: 61.4 (equal 3rd)

Another of Europe's growth heavyweights, Bulgaria is expected to continue to boost its GDP and touts a moderate inflation rate and a fairly cheap stock market. Its exchange rate moves more than others on the list, but it is said to be fairly easy to do business there.

Source: Bloomberg Markets

2. United Arab Emirates

Total score: 66.9

Economic growth rates are relatively low in UAE, but so is inflation, government debt, and FX volatility. It's also an easy place to do business.

Source: Bloomberg Markets

1. Vietnam

Total score: 71.4

A stellar economic expansion rate puts Vietnam at the top of the list, but that's not the Southeast Asian country's only extreme -- inflation is also sky-high, and its government debt load is among the biggest of the frontier markets analysed. Meanwhile, Vietnamese currency volatility and stock prices are lower than those of many of its peers.

Source: Bloomberg Markets

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